HM Treasury (HMT) has confirmed that the first top-up payments for low earners in net-pay arrangements will be made by 2026/27, warning that the IT changes required to implement the plans for a top-up will be “complex".

The government previously announced plans to introduce a top-up system for low earners in net-pay arrangements from 2024/25, with HMT suggesting at the time that the first payments would be made after the end of the 2024/25 tax year, in 2025/26.

However, in response to a request for evidence as part of the Work and Pension Committee’s inquiry, HMT confirmed that, given other ongoing HMRC delivery programmes, the system changes will be in place by April 2025.

“So, the first top-ups will be based on pension contributions made in 2024/25 and paid by 2026/27,” it said.

Despite the complexity, HMT suggested that paying the top-up in arrears, rather than in-year, will help reduce burdens on individuals, employers, and pension schemes.

It explained: "An individual’s tax position – and therefore their eligibility for a top-up – will only be known after the tax year ends when all sources of income are known.

“If top-ups were paid in-year, this would risk payments being made to individuals who would not ultimately be eligible for it. This would require repayment of the bonus from these individuals and would be challenging for both individuals and HMRC.”

It also confirmed that HMRC will use customer insight experts and work with key stakeholders to design and develop a suitable digital service for customers, as well as provide additional support services to enable those that are digitally excluded to receive payment.

“HMRC appreciates that it will need to consider how and when it communicates with customers eligible for this top up payment and ensure they recognise it as a genuine communication from HMRC,” it stated.

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